The opinion of the court was delivered by: BRYAN
The petitioners are the Trustee in Bankruptcy of John Viviane & Son, Inc., the bankrupt herein, and the attorney for such trustee. They seek an order awarding them 'appropriate costs' pursuant to § 2, sub. a(18) of the Bankruptcy Act and granting them judgment therefor against the respondents jointly and severally. These 'appropriate costs' are their fees and disbursements as trustee and attorney for the trustee, which they also seek to have fixed and allowed. The respondents are respectively the bankrupt corporation, the bankrupt's principal stockholder, his wife, who is the transferee of certain real property which formerly belonged to the bankrupt and constituted its sole asset, and the attorney for the bankrupt.
These proceedings have followed a quite unusual course and this is what has led to this unusual application.
The bankruptcy proceeding was initially commenced on March 20, 1936, when the bankrupt, a corporation owned almost entirely by respondent John Viviani, filed a voluntary petition in bankruptcy. On the same day it was adjudicated a bankrupt and the case was referred to Honorable Robert P. Stephenson, Referee in Bankruptcy.
Neither the bankrupt nor any of the creditors came forward with the indemnity necessary for the expenses of the proceeding. No further steps were taken in the proceeding, and on December 3, 1936, the Referee filed a certificate closing the case, as required by § 2, sub. a(8) of the Bankruptcy Act, 11 U.S.C.A. § 11, sub. a(8).
Nothing further happened in the proceeding until February 8, 1955, when the bankrupt petitioned the District Court for an order reopening it.
This step was taken against the following background. In 1952 the bankrupt corporation had conveyed a parcel of real property which it had included in its schedule of assets in the 1936 proceeding to Barbara Viviani, the wife of the major owner of its stock and the deed was recorded. About a year thereafter the City of New York condemned these premises for housing purposes and a condemnation award was made to Barbara Viviani for more than $ 51,000. Before the entire award had been paid to her, however, the city expressed doubts as to the validity of the title to be conveyed because of the 1936 bankruptcy petition.
The bankrupt's petition for reopening alleged that it was brought for the purpose of putting to rest any doubts which the city might have as to this title. The petition also included allegations that the bankrupt was now solvent, that there were no creditors in existence, and that the parcel of real property which had been condemned was the bankrupt's only asset. It did not disclose that this property had in fact been conveyed to Barbara Viviani three years before or that the condemnation award was to be paid to her. The petition requested that the original bankruptcy proceeding be reopened to determine whether or not the bankrupt should be discharged or the petition dismissed in order that any cloud on the bankrupt's title to this real property could be removed.
On the basis of these allegations the District Court, without notice or hearing, signed an ex parte order reopening the bankruptcy proceedings which had been closed in 1936 and re-referring the matter to Referee Stephenson. The Referee called a first meeting of creditors for March 29, 1955, at which no creditors appeared. On April 5, 1955, the Referee on his own motion appointed Saper, one of the instant petitioners, as Trustee in Bankruptcy. Thereafter Saper appointed petitioner Ross as attorney for the trustee pursuant to an order.
After some investigation, Saper, as such trustee, then brought on a petition in the District Court against Barbara Viviani, the Messrs. Goldstein, her attorneys in the condemnation proceeding who claimed a lien on the award, and the City of New York, seeking to set aside the transfer of the condemned property by the bankrupt to Barbara Viviani and the fee agreement between Barbara Viviani and the Goldsteins covering their fees for services in the condemnation proceeding, directing the Comptroller of the City of New York to pay all funds payable in condemnation to the Trustee rather than to Barbara Viviani, enjoining the Goldsteins from continuing any proceedings to collect their fees, and directing that the claims of all parties be determined by the Bankruptcy Court in summary proceeding. This petition was denied by the District Court on the merits, D.C.S.D.N.Y., 132 F.Supp. 633, upon the theory that the real property had long since been abandoned by the creditors who had all been paid, that title to it had revested in the bankrupt and that there was no bar to the bankrupt's transfer of the property to Barbara Viviani. A motion for reargument by the trustee, upon allegations that certain pre-petition creditors had in fact not been paid prior to the transfer of the property to Barbara Viviani, was denied.
On appeal by the trustee from this decision, the Court of Appeals, without going into the merits of the trustee's claims, held sua sponte that no appropriate basis had been shown for reopening the 1936 proceedings and that the order of the District Court granting such reopening had been erroneous. It therefore reversed the order appealed from and remanded the proceeding to the District Court 'with directions for dismissal of the motion for its reopening and of steps subsequent thereto.' Saper v. Viviani, 2 Cir., 226 F.2d 608, 612.
Thereafter a petition by the trustee for rehearing before the Court of Appeals was denied, and a motion by respondents to recall the mandate, to delete the costs which had been fixed therein in favor of the trustee, and to tax costs in respondents' favor, was granted to the extent of providing that no costs were allowed upon the appeal to any of the parties.
When the orders of the respective parties on the mandate as so amended were submitted to the District Court the Trustee submitted a proposed order providing that the proceeding be referred to the Referee to determine whether costs in the nature of compensation to the trustee and his attorney should be taxed as a result of the bankrupt's motion to reopen the bankruptcy proceedings which the Court of Appeals had ordered dismissed, what amounts should be so taxed, and which parties should be required to pay them. The District Judge refused to sign the trustee's proposed order containing these provisions but also struck from the respondents' proposed order, before signing it, a provision denying compensation to the trustee and his attorney.
Petitioners, trustee and his attorney, on this application submit affidavits setting forth the services they claim to have performed on behalf of the bankrupt estate and the disbursements they claim were necessarily incurred. These services were performed largely in connection with the proceedings to have the condemnation award turned over to the estate and investigations looking toward that end, though they also included the examination of John Viviani at an adjourned first meeting of creditors, and other matters relating to the estate generally.
The petitioners point out that during the pendency of the reopened proceeding two creditors of the bankrupt, listed in the schedules filed with the original voluntary petition, filed claims with the Referee. One of these creditors had a judgment against the bankrupt in the Supreme Court, New York County, and, on motion to extend it up to date, was granted a judgment in excess of $ 23,000. After this creditor commenced an action to set aside the transfer of the real estate by the bankrupt to Barbara ...